Retail Sales Numbers: Which Ones Do You Buy?
Saturday, July 14, 2007
Two days ago, stocks raced to record highs on reports of strong June retail sales. Yesterday, the news cycle did an about-face as June retail sales were described as "crashing" and "plunging" in a record drop.
So which was it? Was June a good month for retailers, or should they be reaching for the Kleenex? And, are we even talking about the same figures?
Short answer: Yes. And no.
The numbers don't lie, but sometimes the truth gets lost in translation. Each analysis of retail sales measures something slightly different, which can result in wildly varying conclusions.
"It's hard to pick one specific data point and latch onto that," said Janet Hoffman, managing partner for North American retail at the consulting firm Accenture.
Let's work backward. The Commerce Department yesterday released its preliminary figures for retail sales in June, including purchases of automobiles and receipts from restaurants and gasoline stations. Taken together, spending in June fell 0.9 percent compared with May, when sales rose a revised 1.5 percent. The decline in June was the largest in nearly two years, setting off much of yesterday's hand-wringing. Excluding car sales, retail sales fell 0.4 percent.
Retailers pointed out, however, that the picture is brighter when comparing last month's sales with June 2006. In that comparison, sales rose 3.8 percent.
"You can't get too caught up in the noise of month-to-month" comparisons, said Craig R. Johnson, president of the retail consulting firm Customer Growth Partners.
Ready to go deeper? The National Retail Federation, an industry trade group, conducted its own analysis of the Commerce Department data but excluded automobiles, gas stations and restaurants from the sales totals. It concluded yesterday that retail spending in June fell 0.5 percent compared with May, but grew 3.4 percent when compared with June 2006.
Rosalind Wells, the trade group's chief economist, said that June is typically a slow month for retailers, but that this year it was exacerbated by higher energy costs. She said she was still hopeful for strong back-to-school spending next month, commonly seen as an indicator for the all-important holiday season.
On Thursday, investors were focused on different numbers after many retailers reported June results for stores open at least one year, known in the industry as comparable store sales and seen as a key indicator of a retailer's health. The hit single was Wal-Mart, which had a 2.4 percent jump in sales last month compared with June 2006, besting analysts' expectations. Such good news from the world's largest retailer helped drive a stock market surge: The Dow Jones industrial average recorded its biggest one-day gain in nearly four years.
Perhaps investors overlooked the performance of other retailers, which was mixed. A report Thursday by the International Council of Shopping Centers showed that department stores and apparel retailers had a drop in comparable-store sales growth in June vs. a year ago. At Macy's, for example, comparable-store sales fell 2.7 percent. On the other hand, drugstore sales rose 4.8 percent and wholesale-club sales rose 6.3 percent, the largest gain in the industry.
The trade group analyzed comparable-store sales from about 50 retailers and concluded that June was a month of "steady" growth, 2.4 percent. That figure is lower than the 3 percent bump in June 2006, but still not too shabby.
Whatever the figures, there was widespread agreement on the underlying reasons for them: High gasoline prices and a slow housing market are both potential culprits in dampening consumer spending. And slow growth is still better than no growth.
"There's still employment growth," Johnson said. "As long as people have jobs, they will continue to spend."